capital gains

CIT v Pursarth Trading Co. (P.) Ltd. [IT Appeal (L) No. 123 of 2013] dtd March  13, 2013 (Bombay High Court) Background: The assessee sold its office premises and secured long term capital gains. However, being a depreciable asset computed its gains in terms of Section 50 of the Income-tax Act, 1961. The Assessing Officer disallowed the claim of the assessee to set off its carry forward long term capital loss against the long term capital gains made under Section 74 of the Act in view of Section 50 of the Act. The Commissioner of Income Tax (A) upheld the order of the Assessing Officer.

Long Term capital loss can be setoff against Short Term gain u/s 50 (if the ...

Rallis India Ltd v Additional CIT [IT APPEAL NO. 2464 (MUM.) OF 2010] (Mumbai ITAT) Background: The assessee-company declared short term capital gains on sale of flats u/s. 50 of the Act. Out of the flats sold, a flat was sold for a consideration of Rs. 1,65,00,000. The AO addressed a letter, u/s. 50C of the Income Tax Act, to Joint Sub-Registrar, Department of Stamp and Registration, Worli to furnish the value adopted by the Stamp Valuation Authority. The Joint Sub-Registrar informed that the stamp value of the said property was Rs. 1,86,01,380/-. Since section 50C of the Act speaks of the value adopted for stamp duty purposes, the addition of Rs. 21,01,380/- was made by the AO and the same was confirmed by learned CIT(A).

Stamp duty valuation u/s 50C applicable even in cases of depreciable assets – Mum ITAT

Apoorva Patni v ACIT IT APPEAL NOS. 192, 193, 239 & 273 TO 276 (PN) OF 2011 (Pune ITAT) Background: The assessee filed her return of income for the assessment year 2006-07 declaring a total income of Rs 13,95,40,653/- under various heads of income, viz. income from house property, business income, capital gains and income from other sources. The income declared under the head capital gains included short term as well as long term capital gain on investments made through the PMS providers. Besides, the assessee has also declared capital gains, both long term and short term, from direct dealing in mutual funds, investments also. Apart from the aforesaid dealings in shares and securities, the assessee also had a portfolio wherein income from share and securities transactions was declared as business income. In this factual background, the Assessing Officer treated the short term as well as long term capital gain earned through the investments made through PMS providers amounting to Rs 3,86,38,849 as income which was liable to be assessed as ‘business income’ and not under the head ‘Capital gains’. The Commissioner of Income-tax (Appeals) has, however, upheld the contentions of the assessee that the gain from investments made through the PMS provider was assessable under the head capital gains.

Income from PMS is capital gains and not business income – Pune ITAT

Armstrong World Industries Mauritius Multiconsult Ltd., In re  A.A.R. NO. 1044 OF 2011 (dtd 22.08.2012) Background: Armstrong World Industries Mauritius Multiconsult Ltd (Armstrong Mauritius) is a wholly owned subsidiary of Armstrong World Industries Limited United Kingdom (Armstrong UK). Armstrong UK in turn is a fully owned subsidiary of Armstrong USA. The Armstrong Mauritius was incorporated in Mauritius in the year 1999. It is a tax resident of Mauritius. Armstrong World Industries India (Pvt.) Limited (Armstrong India) was incorporated in India in the year 1999 as a wholly owned subsidiary of Inarco Ltd., an Indian company. Inarco Limited was engaged in the business of production of textile machine parts and floorings. Armstrong UK, through the applicant, was holding 50% of the share capital in Inarco Limited. Pursuant to a scheme of amalgamation, approved by the High Court of Bombay, the flooring business of Inarco Limited was transferred to Armstrong-India. In consideration of that transfer of business, Inarco Limited was allotted 3,60,000 shares of the value of Rs. 10/- each in Armstrong India. Subsequently, Inarco Limited transferred to Armstrong Mauritius 36,00,000 shares of Rs. 10 each of Armstrong India. This resulted in Armstrong Mauritius holding 99.97% of the share capital of Armstrong India. The other 0.03% of the shares therein are held by Armstrong UK.

AAR disregards Revenue’s arguments for treating Mauritian company as conduit company

CIT v Vaibhav j Shah (HUF) [Tax Appeal No: 77/78 of 2010] [Gujarat HC] Background: The assessee offered the gains from buying and selling shares as LTCG/ STCG. The AO held that the assessee was “dealing heavily in shares” with high frequency and magnitude and that the gains were assessable as business profits. This was reversed by the CIT (A) and Tribunal.

Tests for determining taxability for dealing in shares as Capital Gains OR Business income – ...

DIT v Credit Suisse First Boston (Cyprus) Ltd. [IT APPEAL NO. 1026 OF 2011] (Bombay HC) Issue 1: Whether Interest accrued but not due on the balance sheet date is taxable Background: The assessee is a company incorporated in and is a tax resident of Cyprus. It carries on business of banking and was, at the relevant time, registered in India with the Securities & Exchange Board of India (SEBI) as an approved sub-account of Credit Suisse First Boston, a Foreign Institutional Investor (FII). SEBI had permitted the assessee to invest in India exclusively in debt-securities, including Government securities. The assessee follows the mercantile system of accounting. The assessee filed its return of income for the assessment year 2001-2002 on 31st October, 2001, declaring a total income of Rs.5,94,28,493 comprising of interest income from securities and claimed exemption in respect of income on sale of securities. The AO held that Rs.1,21,57,517/- is required to be taxed as interest accrued though not due on securities held by the assessee as on 31st March, 2007, being the last date of the financial year. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted both the additions. The ITAT upheld the order.

Taxability on “Interest accrued but not due”; Excess amt received on sale of govt securities ...

Smt Girija Reddy v ITO [IT Appeal No. 297 (Hyd.) of 2012] (Hyderabad ITAT) Background: During the year under consideration, the assessee, a partner in the firm M/s. Montage Manufacturers, retired and her account had been credited by the firm with Rs. 7,95,88,639 being her share of goodwill. The Assessing Officer held that the crediting of the amount of Rs. 7,95,88,639 in lieu of the assessee’s share of goodwill on her retirement also amounting to transfer, and therefore, such receipt is liable for capital gains tax, as her right in the firm is a capital asset and extinguishment thereof amounts to transfer.

Lumpsum consideration received on retirement is chargeable to capital gains – Hyderabad ITAT

Jafferali K. Rattonsey v DCIT [IT APPEAL NO. 5068 (MUM.) OF 2009 dated 25.1.2012] (Mumbai ITAT) Background: The assessee had claimed exemption for Long Term Capital Gain of Rs. 4,94,51,910/- on account of sale of shares u/s.10(38) of the I.T. Act. During the course of assessment, the assessee furnished demat account, brokers’ note and bank account statements to substantiate his claim u/s 10(38). AO noted that shares are dematerialized immediately before the date of sale i.e. either on the same date of sale or 2 to 3 days before the sale of shares. The AO contended that the date of purchase can be considered only as date of dematerialization in the Demat Account with Techno Shares and Stocks Ltd. Price of the shares on the date of dematerialization would then become the purchase price of the assessee. The sale was held to be short term capital gains. CIT(A) upheld the decision of AO in this context

Period of holding to be determined from the date of purchase and not from the ...

Pentamedia Graphics Ltd.v DCIT [ITA Nos 1780 (MDS.) OF 2009, 1733, 1768 and 1887 (MDS) OF 2010] (Chennai ITAT) Facts of the case Assessee is engaged in the business of multimedia computer graphics and animation. Assessee’s software and training division was hived off to its sister concern M/s. Pentafour Communications Ltd. The consideration for the transaction was Rs. 894.21 crores. No amount was attributed towards goodwill. But amounts were attributed towards non compete fee, sale of brand name, sale of IPR, etc. In its computation of income, the assessee has not offered any capital gains towards transfer of goodwill. The accounts of the sister concern M/s. Pentafour Technologies Ltd. reflected Rs. 626,08,80,282 under the head ‘fixed assets’ towards goodwill on acquisition of the software division.

Non-compete fees to a sister concern is a colorable device for ‘Goodwill’ to evade tax ...